Transport executives have plenty to worry about as COVID-19 cases increase in some states and businesses reopen in others. Tort cases are top of mind now, though the financial burden and rising insurance costs related to tort are industry concerns beyond the pandemic. The American Trucking Associations (ATA) isn't letting up in its quest to limit awards, but one attorney said the industry is asking for too much protection from liability.
The average trucking-related jury award jumped 483% from 2017 to 2018, with awards over $1 million increasing "dramatically over the last 14 years," according to a June 24 report by the American Transportation Research Institute (ATRI).
The ATA, ATRI's parent organization, refers to awards exceeding $10 million as "nuclear verdicts." The increasing number of awards — and their size — has alarmed ATA, which says trial lawyers are focusing on the transport industry. One reason is because the trial attorneys appear to believe there are big awards to be had by suing big trucking companies.
"We have to get away from this notion that a truck accident is a big payday," Randy Guillot, the owner of Triple G Express and the chairman of the ATA, told Transport Dive. "These nuclear verdicts seem to be going overboard."
"Nuclear verdicts are strangling our industry."
President and CEO, American Trucking Associations
ATRI prepared the 81-page report, "Understanding the Impact of Nuclear Verdicts on the Trucking Industry," only months after Chris Spear, ATA president and CEO, blasted the trend of growing awards. He charged, at the ATA's Management and Conference Exhibition (MCE) in October 2019, that trial attorneys were taking food off the tables of truckers by taking advantage of truck accidents.
"Nuclear verdicts are strangling our industry," Spear told the MCE attendees. "I am sick and tired of playing defense while trial lawyers buy jets and yachts at the expense of trucking jobs."
But accidents were not the only reason for jury awards, according to the report. Lawsuits were initiated for other reasons, including bias in hiring. Since 2010, according to the report, the size of verdicts has "far exceeded" standard inflation and increases in healthcare costs, which grew 1.7% and 2.9% per year, respectively.
In the 451 court cases looked at since 2006, the mean dollar value for awards over was about $3.1 million, with a median value of $1.75 million. The highest award was $91 million. Often, the reasons for large awards vary. But the report noted accidental deaths, and the number of deaths per accident, increase jury awards.
Since Jan. 1, 2006, through the end of 2018, 34,583 car or small-truck passengers or drivers died in accidents with heavy trucks, according to the Insurance Institute for Highway Safety. Another 7,177 pedestrians, bicyclists or motorcyclists died after crashing with trucks, in the same time frame. And 7,995 occupants of heavy trucks died in road accidents in that time frame. (The IIHS does not specify causation of crashes.)
Cases with $1 million or more in awards peaked in 2013, ATRI reported, with more than 70 such successful lawsuits.
Targeting 50 states and Congress
ATA won't let up in its quest for tort reform, to limit the awards. The ATA has made outsized jury awards a top legislative target. Guillot said that will mean heavy work, in Congress and in all 50 state legislatures. ATA is one of the few organizations that is up to such a task, he said.
A secondary effect of large awards has been to scare insurers away from the truck market. Zurich and AIG unit Lexington left the market in 2015, according to the Wall Street Journal.
Werner took to self-funding its insurance for the first $10 million of each liability, and it has already had to use that money. In January, a Werner truck was involved an accident. CEO Derek Leathers did not go into detail about it when speaking to investors about Q1 2020 performance, but said Werner officials approved $10 million in self-insurance for the accident payment, which reduced its earnings per share by 11 cents. The company reported $27.7 million in net income for Q1 2020.
In turn, the insurers who stay in the market raise rates on carriers. In 2019, HVH Transportation of Denver declared bankruptcy and closed its doors. Former CEO John Kenneally told Transport Topics that HVH had been paying $150,000 a month in insurance costs, with a $100,000 deductible, but was told last summer that the monthly rate would rise to $358,000. HVH's insurer also asked for a $750,000 payment to write the policy. Instead, the fleet shuttered, its cash flow damaged.
The trucking industry is also increasingly nervous about the reopening of businesses as stay-at-home orders expire. On May 27, the ATA joined 240 other trade organizations in a letter to Congress, asking lawmakers to enact "temporary and targeted liability relief legislation" related to the COVID-19 pandemic. The coalition offered no proof of any such imminent strategies or actions, but the "fear and uncertainty from boundless liability" alone led them to tell lawmakers that such lawsuits "[threaten] to impede our country’s social and economic recovery."
The groups asked for protection from lawsuits related to coronavirus infection as states begin to lift social-distancing measures (though some are now beginning to reinstate them). The ATA and the U.S. Chamber of Commerce said the temporary protection will safeguard businesses, nonprofit organizations, educational institutions and healthcare providers from unfair lawsuits.
The cosignatories wrote they were concerned that, even as they follow COVID-19 and reopening guidelines, "they will be forced to defend against an onslaught of frivolous lawsuits. The prospect of such litigation and associated exorbitant legal costs are a deterrent to reopening."
The ATA's head of advocacy said trial attorneys would likely use the issue of reopening — however delayed the reopening of some states and businesses may be, as U.S. cases may be showing a new surge — to file infection-related claims.
"As we move from the crisis to recovery, we should be supporting truck drivers and ambulance drivers, not ambulance chasers," said Bill Sullivan, ATA EVP of advocacy, in an email to Transport Dive on May 28. "Allowing the plaintiffs bar to use [COVID-19] to open a new front on their assault on the trucking industry is something that cannot be allowed."
"Caps always affect the most grievous cases. How do caps affect frivolous cases? They don't."
Lawyer and former president of the Consumer Attorneys of California
California lawyer Brian Kabateck, the former president of the Consumer Attorneys of California, told Transport Dive that the ATA and Chamber were asking for too much protection from liability.
"That's bordering on ludicrous," said Kabateck. "That's like asking for Christmas presents in July."
Kabateck said transport and logistics companies do not deserve special consideration as business reopen, and he noted viral infection cases are very hard to prove anyway.
"I don't think you're going to see a lot of tort cases [against transport companies]," said Kabateck.
Attempts to limit, or "cap," jury awards are also wrong, he said. The reason is the most worthy cases get the highest awards.
"Caps always affect the most grievous cases," Kabateck said. "How do caps affect frivolous cases? They don't."
What trucking companies really want is to limit their liability and their exposure in highway accidents. Reduced liability is also a request Kabateck has heard. An example would be a logistics company or a broker being held liable for a truck driver far downstream from the business transaction, he said. Cracking down on frivolous lawsuits is also something many trial attorneys support.
"That's a discussion we can have," said Kabateck.
Guillot said the ATA is not trying to get out of paying fair compensation in accidents or other cases. The standard ATA will pursue will be roughly the same in all the states, despite the differing business and legal environments in each state.
"We're looking for fair and equitable," said Guillot.